My SIBOS impressions - Geneva 2016
This is not just another article you’ve probably read in the media claiming that this year’s big topics at SIBOS was Blockchain and Cybersecurity. Yes, a lot of conferences focused on these themes and discussions about these subjects could be heard in various booths and corridors throughout the venue. Also FinTech and its evolution RegTech were being discussed by everyone.
Instead, I would like to focus on the daily business, the near future of banks, standards, and other initiatives as well as corporation-to-bank connectivity issues.
The perfect storm in payments: PSD2 and Instant Payments
Payment Service Directive 2
PSD2 is the most liked acronym from the FinTech field and at the same time the most feared for banks. But there is light at the end of the tunnel. The banks seem to have accepted that an API-sation of the industry cannot be avoided and that this reality also provides a lot of opportunities. The Father of Economics, Adam Smith would be proud if he could hear about these big changes. Banks in the future can provide inexpensive services that serve the greater good, perhaps based on legacy systems. The rest they can buy connecting over API’s to several PSP’s. And if PSP’s don’t perform, it will be very easy to switch to another one.
“Banks keep calm and do API’s!”
In 2014, the European Central Bank invited the supply side of the market to help achieve an open and competitive market for instant payments. The EBA-Euro Banking Association asked leading banks to describe and start this new method together. This new method is based on SEPA and called “SEPA inst”. 39 banks across the whole SEPA area agreed to start working on this initiative. They expanded quickly and at this year’s SIBOS the group announced that there are already some pilot banks working perfectly in testmode. The official start will be in November 2017 with all 39 banks. Another 40 banks already expressed an interest in “SEPA inst” too, which is great news. Some attendants asked the plenary how a reconciliation could be done if an instant payment is done from Geneva at 9am and it arrived in London at 8am. The answer was quite clearly: “The banks will solve this challenge!”.
SWIFT Global Payments Innovation (GPI) Initiative
There are big expectations in this initiative because the actual situation is absolutely dissatisfying. Because of these issues a lot of FinTech companies try to enter the market. And as we can see, they are often very successful.
There are 88 banks (as of September 29th 2016) worldwide which want to adopt this new method of making international payments. This is not a new product or a new Standard. This is “only” a change and improvement on the SLA’s (Service Level Agreements).
The new international payment will be trackable like a post package thanks to an end-to-end ID which also helps in the reconciliation. Additionally, the commissions and fees would be absolutely transparent. Finally, if it’s possible because of time zones, the payments can arrive and be booked on the same day to the creditors’ account.
Tom Durkin Managing Director, Global Head of Integrated Channels at Bank of America Merrill Lynch, said that it is most likely that not only banks but also other providers like FX All could participate in this initiative. I’ll keep an eye on this initiative and will write more in another blog post.
For years the Standard ISO20022 is an important topic at SIBOS.
After last year’s quiet announcement, it was surprising to hear that the USA decided to introduce this Standard too. This is a big step forward in a dream where all the banks worldwide can communicate without barrier. Jim McDade Senior Vice President, Product Management at The Clearing House explained on different speeches that by the year 2020 the American banks must be able to accept ISO20022-XML messages. When the banks will be ready to send these messages has not been decided yet.
There were also several conferences at the Standards Forum where we heard how different countries like Switzerland, Canada and Australia or regions like the SEPA Region are introducing or have already successfully introduced this Standard.
One important note from those who already adopted to the adopters: if your end date is not legally mandated, it is very important that the whole financial system communicates frequently and clearly informs users that the end date is non-negotiable and that the whole financial infrastructure should follow this roadmap.
There were a lot of interesting conferences regarding Corporate topics. But sadly, sooner or later there were complaints about two major things:
- KYC- Know Your Client
- Bank billing
Normally in cash management there are only a few people. There must be better possibilities to improve this KYC process.
Daniel Ochsner Head Central Settlement, Member of Management at Würth Finance International B.V. suggests that SWIFT opens his KYC Registry to corporations as well.
Ochsner is waiting for the day where most of the banks can send him a camt.086 (the electronic bank billing message). There is a real corporate need for this.
Additionally, eBAM- electronic Bank Account Management- would be very useful and can streamline the processes on both sides.
That’s all! Hope you enjoyed it/my post/my thoughts. I am open for discussions, just send me an email or comment below.
About the Author
Oscar Neira is a banking consultant. He writes mainly in German but also in Spanish about payments, Fintech and banking digitization topics. As a correspondent for www.iso-20022.ch he is deeply involved in the Swiss Payment Harmonization project.
www.iso-20022.ch is a deeply specialized platform which wants to give payments knowledge to the banking and user community. Topics regarding the big payment standards harmonization in Switzerland are the focus of the platform. The page is visited by bank, software producer and corporate employees who are involved in the payments and treasury area of IT and business or consultancy. Especially the dictionary (https://www.iso-20022.ch/lexikon/), a knowledge database, is the most visited part of the page.